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    Allianz chief economic adviser discusses US wage decline and rising inequality tied to inflation reduction

    by VT Markets
    /
    Aug 4, 2025
    Mohamed El-Erian, the chief economic adviser at Allianz, has raised alarms about wage inequality in the US. He noted that wage growth is slowing for most people, except for the highest earners. This slowdown might help reduce inflation. However, those facing wage cuts are likely more worried about their personal situations than the overall economy.

    Wage Disparity Concerns

    Right now, there is a distinct divide in the American job market. Wage growth is slowing for almost everyone, except for top earners. While this may help ease inflation, it’s adding stress to average households. The most recent jobs report from July 2025 shows that wages for the bottom half of workers dropped by 0.5% when adjusted for inflation. Meanwhile, top earners saw an impressive 4.5% increase in their paychecks. This marks a significant change from the widespread wage growth we enjoyed in 2023. This creates differing trends in consumer spending that we can leverage. We might consider buying put options on exchange-traded funds (ETFs) that focus on mid-range retail like the SPDR S&P Retail ETF (XRT). At the same time, bullish call option strategies for luxury goods companies could do well as wealthier consumers continue to spend.

    Economic Divergence

    July’s retail sales figures support this trend. High-end brands experienced a 7% rise in sales, while discount department stores faced a 3% drop. This division in the economy is becoming more clear than it has been since the 2008 recession. There was a similar, though milder, pattern late in 2023 before the market adjusted. With the Federal Reserve’s preferred inflation measure, the Personal Consumption Expenditures (PCE) index, down to 2.8%, the likelihood of interest rate hikes has disappeared. This cooling economic landscape, combined with weak consumer health, may lead to volatile markets in the coming weeks. Buying call options on the VIX index could be a smart strategy to protect against this expected volatility. Create your live VT Markets account and start trading now.

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